Discrimination is a luxury

We empirically test the relationship between hiring discrimination and labour market tightness at the level of the occupation. To this end, we conduct a correspondence test in the youth labour market. In line with theoretical expectations, we find that, compared to natives, candidates with a foreign sounding name are equally often invited to a job interview if they apply for occupations for which vacancies are difficult to fill, but they have to send twice as many applications for occupations for which labour market tightness is low. Our findings are robust against various sensitivity checks.

3 Responses to Discrimination is a luxury

I’ve always believed in “job queue” models of the labour market matching process. Employers sort the queue, whether it is long or short, by various cheap but highly imperfect signals (such as foreign sounding names which have a slightly-higher-than-average probability that their qualifications are not kosher). Whether the sorting makes much difference to the people so sorted depends entirely on the length of the particular queue, as this article implies.

The fact that such “statistical discrimination” is brutally unfair and sets up self-reinforcing social segregations (why bother getting an education if no-one will give you a job because of your name/skin colour/disability etc?) does not change the fact that the individual employer is rationally pursuing her own self interest. You don’t need to assume genuine prejudice; that is, a mistaken estimate of group average characteristics. It is enough that group averages differ slightly and it is far cheaper for the employer to shortlist by group averages than by testing individual characteristics.

But then that is precisely why you need compulsion or other strong affirmative action – to make her act “irrationally”. Merely telling her that all group averages are all the same, or that it is more personally efficient for her to individually interview and assess every single applicant, won’t work because she knows both are untrue.

This doesn’t examine active discrimination, merely when a discriminatory laziness is allowed into decision making, i.e. discrimination as a form of luxury when spoilt for choice but feeling a tad time poor and that its all too hard. Other lazinesses include sorting applications by weight, or taking the first ten on top of the pile, etc but they of course may have less social impact.